Calgary’s office tenants are steadily returning to the city’s core, bringing downtown vacancy rates lower to 26.5% during the first quarter of the year, CBRE stated in its latest data release.
This level is markedly lower than the area’s peak 27.8% vacancy in Q2 2018. Much of the inward movement is impelled by much better rental rates in the core’s higher-class buildings.
“The main point is the free fall into higher vacancies has hopefully stopped,” CBRE Alberta regional managing director Greg Kwong told The Star Calgary.
The highest tier of office buildings in Calgary (Class AA) now boast of 16.3% vacancy, compared to the 20.8% back in mid-2018.
“The story there is that the tenants are doing a flight to quality as rates become more affordable,” Kwong explained.
He also cited positive leasing absorption in Q1 as a major element adding strength to the downtown market.
However, Kwong emphasized that these numbers do not necessarily point to a sustained recovery from the recent economic troubles.
“I wouldn’t say we’re out of the woods,” he warned. “Two things that it points out ... we’ve seen a lot of new buildings being constructed and being delivered to the market over the last three, four years, and that has now stopped.”
Alberta’s rental residential market is experiencing a similarly gradual return to stability, with figures from the CMHC indicating that the province’s vacancies in this asset class fell from 7.5% in 2017 to 5.5% in 2018.
“Calgary and Edmonton now have some of the most affordable rents in the entire country. Five or six years ago, we had the exact opposite situation, where our rents were one of the highest,” Boardwalk REIT chairman and CEO Sam Kolias told The Canadian Press last month.